Adventures in Legal Outsourcing to India and Beyond

September 2010

September 30, 2010

India's The Economic Times reports as follows on the strong future prospects for off-shore legal outsourcing: A "[l]eading (LPO) player said that the industry is on the fast-track and could provide jobs to 30,000 personnel, double the present level, in the next one year." Quoting Pangea3 co-CEO Sanjay Kamlani: “The industry is growing phenomenally. It has already provided 15,000 jobs in the last five years and this is set to double....”

Kamlani is further quoted as follows: “The growth trend is accelerating. We are on track for a 100% growth in revenue over the next year. In line with this, we also plan to scale up our headcount to 1,000 by the second quarter of FY12.”

Below is another excerpt from the article,which highlights both the past growth and future prospects of legal process outsourcing / legal services KPO:

The LPO industry has grown phenomenally in the last couple of years. Last year, it grew 100%, he said, adding that he expected this trend to continue for the next two years at least. “The legal services industry in the US and UK is $400 billion and only about $1 billion is presently outsourced, indicating the immense potential this segment has,” Mr Kamlani said.

While Mr Kamlani would not divulge the company’s financials, he said that Pangea3 has over 200 regular clients, of which 60 are recurring clients every month. “Our clients are all blue-chips — Wall Street firms and Fortune 100 companies,” he said. The company presently has two centres in India — at Mumbai and Noida — and could set up another in a tier-II destination going forward, he said.

Asked about the growth drivers for the industry, Mr Kamlani said that outsourcing results in tremendous cost-savings “of anywhere between 60-90 %. Besides, the LPOs here are very efficient and provide high quality services.” On future plans, Mr Kamlani said that Pangea3 plans to acquire more foreign language capabilities and going forward, could set up another centre in another location, such as East Europe.

September 20, 2010

Lord Ellenborough said: “The greater the truth the greater the libel.” This applies aptly to many of the defamation suits prosecuted in the last few decades. It is true that modern technology has greatly expanded the horizon of communication and publication of information. However, along with useful information, defamatory material also does not take much time to get publicized all over the globe. To recall another prescient quote, this one from Mark Twain, "A lie is halfway around the world, while truth is still putting its boots on." Libel, being the written form of defamation, has become much more of an international legal issue with the advent of the internet. This has been highlighted in particular by “forum shopping” on the part of opportunistic libel plaintiffs.

In libel cases, forum shopping is more popularly known as "libel tourism." English defamation law has been strongly pro-plaintiff, so countless libel cases with only minimal connection with the United Kingdom have been filed there. In most cases, the courts in England have been overly active in entertaining libel cases from other jurisdictions. Most importantly, the English courts assume the falsity of the allegedly defamatory statement, and it becomes the uphill task of the defendants to prove that the statement is true. Also, the defenses of public interest or “absence of malice” are not accepted by the English courts. So, even a statement about a politician or other public figure must be proven true, to the hilt, by the defendant. It makes no difference if the defendant is an honest journalist or someone who otherwise had reason to believe the truth of the statement.

The favorable treatment of plaintiffs in English libel cases has had a positive impact on the workflow of the lawyers on both sides there. As a result, the legal fees involved in such cases are often quite high, such that usually only wealthy clients can have adequate legal representation in libel disputes. This factor further elevates the problem of libel tourism. Writers and journalists usually cannot match the economic might of powerful plaintiffs, and so most of the time such defendants are compelled to pay a settlement ransom, or accept a default judgment, instead of defending themselves in court.

The downside of libel tourism came into the limelight in Rachel Ehrenfeld’s case. In her book, “Funding Evil,” she asserted that Saudi banking magnate Khalid Salim bin Mahfouz provided financial support to Islamic terrorist groups. In response, Mahfouz sued Ehrenfield for libel, in England. Although none of the parties lived there, and although the book was never published in Britain, Mahfouz’s lawyers contended that around 20 copies of the book were sold there, online. The court considered this negligible sale as sufficient ground for exercising its jurisdiction over the case. Ehrenfield refused to recognize the jurisdiction of the British courts and did not defend herself. So the judge ruled that she had to pay a judgment of $225,000, apologize for false allegations and destroy existing copies of her books. The judgment was never enforced in U.S., where Ehrenfield generally resides. However, her reputation among publishers was severely tarnished by this judgment. Using English courts, Bin Mahfouz has threatened or successfully sued over 40 authors and publishers for reports on funding of terrorist activities. In all these cases, Mahfouz extracted settlements, default judgments, apologies, retractions and fines, without ever obtaining a jury verdict in his favor.

Another apparently unfair libel prosecution was that against Al Arabiya. This is a satellite television network, based in Dubai and broadcasting in Arabic. A Tunisian businessman sued Al Arabiya in England, because he was said to have terrorist links in one of the channel's broadcasts. In this case, the English court assumed jurisdiction, once again even though the parties and their dispute had no substantial connection with the UK, this time because the program was available by satellite in Britain. Al Arabiya did not try to defend against the charges in court, and in November 2009, the plaintiff was awarded more than $300,000 in damages.

After the Ehrenfield case, public awareness against libel tourism started growing in the U.S. On May 1, 2008, the Libel Terrorism Protection Act was passed in the State of New York. This act prohibits the enforcement of a foreign libel judgment unless the foreign country has the same or better protection for freedom of speech, compared to that of the U.S. The defendant is also entitled to move to declare a foreign libel judgment invalid in New York, under this law. Following the trend, similar laws were also passed in the states of California, Illinois and Florida.

To harmonize the various state laws concerning enforcement of foreign libel suits, the Securing the Protection of our Enduring and Established Constitutional Heritage Act (“SPEECH Act”) was passed by the U.S. Congress this year. Like the state laws, the SPEECH Act renders foreign libel judgments unenforceable in the U.S., unless there is adequate protection for the right to free speech in the foreign country. This Act also provides immunity to third-party interactive computer service operators. This is because suing such defendants, even though they usually are nothing more than neutral common carriers, much like a telephone company, is a very common device used by plaintiffs to circumvent the defenses provided to authors.

As much as libel tourism is considered an evil, there also exist arguments against harmonization of libel laws of different countries. Trevor Hartley, Emeritus Professor at the London School of Economics, has raised such arguments, summarized as follows:[1]

He argues that defamation law is subject to cultural values and practices. So, a statement that is defamatory in one country could be absolutely acceptable in another.

Another argument raised by Prof. Hartley is that in order to reach a consensus on a common rule for defamation, the resultant law could be very complex. This would greatly reduce the certainty and predictability in defamation cases.

Thirdly, although there could be a common rule for deciding defamation cases, its interpretation would differ from country to country. Every country would apply its cultural norms in interpreting the rule, and as a result, the whole purpose of a common rule would be defeated.

The fee charged by the lawyers is also a contributing factor to libel tourism. Even if there is a common rule, plaintiffs will still file libel suits in England. This is because for defendants, it still would prove too costly to afford counsel, creating an unjust advantage for the plaintiff.

It is evident that harmonization of substantive defamation law will not solve the problem of forum shopping or libel tourism. A more effective remedy would be the international harmonization of procedural laws relating to jurisdiction over such cases. Agreement among countries on the place of jurisdiction (for example, the place of publication or place or actual harm), will reduce the problem. Ideally, jurisdiction should be at the place of actual harm, because nowadays, when any statement is accessible over internet and/or television, all over the world, the place of publication is arguably everywhere. Such an overhaul of jurisdictional law would minimize the abuse of profitable jurisdictions by opportunist plaintiffs, and libel cases would be tried in countries where they deserve to be tried, if they deserve to be tried at all.

Another effective weapon in curtailing the abuse of libel law in the UK and elsewhere can be the use of offshore legal outsourcing, often called legal process outsourcing or LPO. The UK's second largest commercial television network, Channel 4, was able to defeat a libel suit against Sacha Baron Cohen's "Ali G" show, at a fraction of the usual cost, by using highly trained media defense lawyers located in India. In particular, Channel 4 retained India's high-end legal outsourcing company, SDD Global Solutions, in Mysore, to conduct all of the legal research, write all of the first drafts of the litigation papers, manage the discovery, and assist with the depositions. The India team's work included the successful motion for summary judgment against the plaintiff, and the successful opposition to the plaintiff's appeal. As a result, the cost of defeating the libel suit was far less than would have been the cost of settlement. Channel 4 was so pleased with its legal outsourcing team that it issued a press release stating that the Channel was "happy not only with the result in the 'Ali G' case, but also with the low legal fees that made the defense possible," and that this was "a groundbreaking case where ‘outsourcing’ has proved to be a creative solution to running a robust defense.”

That particular case was defeated in Los Angeles, but as discussed at the most recent MLRC London Conference on International Developments in Libel, Privacy, Newsgathering, and New Media Law, where leading media lawyers gathered from all over the world, the offshore legal outsourcing solution could be equally if not more effective in the UK, where defense costs are even higher than in the United States. Incidentally, as happened in the "Ali G" case, the use of Indian legal outsourcing created more work for Western lawyers than would have existed otherwise, because without the offshore assistance, the case simply would have been settled.

________________________________________________

* Sayuj Banerjee is a lawyer at India's #1 ranked, high-end legal outsourcing ( legal process outsourcing / LPO / legal services KPO ) company, SDD Global Solutions. At SDD Global, which is the only Indian legal outsourcing company managed by a U.S. law firm, and which has offices in Mysore, Bangalore, New York, and London, Sayuj has worked on high-profile matters for major international media clients. After graduating with honors in 2008 from one of India's top law schools, the National University of Juridical Sciences (NUJS), Sayuj joined the mergers and acquisitions team of a leading India law firm, Economic Laws Practice. Subsequently, he also worked as a practicing advocate in the Calcutta High Court. Sayuj has developed significant expertise in drafting corporate transaction agreements, performing due diligence, preparing litigation related documents, and arguing matters before the court. Sayuj’s favorite area of work is intellectual property rights, and he has done substantial work in European patent law. His interest in learning and mastering media law and copyright law led him to join SDD Global Solutions.

Also of interest in the LegalWeek article is the report that CPA Global is focusing more on corporate legal departments, and less on law firms, and that the company is going against the LPO grain by staking out a position in high-end legal services, rather than process-driven work. Indeed, CPA Global prefers the moniker, "legal services outsourcing" (LSO), rather than "legal process outsourcing" (LPO) -- a development we have been recommending to the industry for years.

In addition, LegalWeek reports that Rio Tinto is about to conduct a searching review of the services provided to it by U.S. firms Sullivan & Cromwell, O'Melveny & Myers, and Baker & McKenzie, as well as U.K. firms Herbert Smith and Linklaters. With the rise of off-shored legal outsourcing, the days when corporations had only two choices, increasing the size of their in-house legal departments or relying even further on expensive outside counsel, are over.

Below are a few excerpts from the article:

Leah Cooper's decision in February to quit her job as Rio Tinto managing attorney and EMEA general counsel to take a business development role at legal outsourcing provider CPA Global caused quite a stir. At the time, the outsourcing deal she struck with CPA on behalf of Rio - which since last May has seen the mining giant send out low-level legal tasks to a team of CPA lawyers in India - was less than a year old. And few expected the brains behind - and recognisable face of - the headline-grabbing initiative to jump ship so soon.

Six months on, though, and the disruption caused by Cooper's departure appears but a distant memory, with business apparently very much as usual in the Rio Tinto legal department. Chief counsel for exploration Angela Mullany has added Cooper's managing attorney role to her responsibilities, while general counsel for business development Warren Goodman has taken over the EMEA general counsel position.

* * *

The outsourcing agreement with CPA continues and Mullany says the plan is to take it to the next phase by "refining existing processes" and "identifying new opportunities to maximise cost savings". (When it was initiated, Rio claimed the arrangement would reduce its annual £60m legal bill by 20%.) That is likely to mean increasing the size of the team in India - which works out of a separate 'Rio Tinto room' in CPA's offices in Gurgaon near Delhi - by around a third to approximately 18 lawyers over the coming months.

* * *

Meanwhile, later in the year Rio is expected to start a review of its external law firm advisers with a view to creating its first-ever formal legal panel. Mullany, whose remit as managing attorney includes overseeing the budget for managing external counsel, will be involved in the process, but it is being led by Goodman and chief counsel for global business services Neville Henwood. Rio's current crop of regular advisers include Linklaters and Herbert Smith, as well as US firms Sullivan & Cromwell, Baker & McKenzie and O'Melveny & Myers, plus Australian duo Allens Arthur Robinson and Blake Dawson, alongside a host of smaller local firms in the multiple jurisdictions in which the company has a presence.

* * *

Cooper admits that it has been a big change to go from a legal role to an entirely commercial position, but she says she is "relishing the challenge". Part of that challenge has been to develop a strategy that is seeing CPA target corporates rather than focus only on law firms, while positioning itself at the higher end of the market as a provider of legal service outsourcing, as opposed to legal process outsourcing.

Cooper insists the distinction is more than semantics: "Unlike our competitors, we're a pure-play legal services outsourcer, having moved away from process-driven work," she explains, adding that she will be in a position to announce a number of new multinational clients when she speaks at Legal Week's Corporate Counsel Forum on 14-15 September.

September 11, 2010

Off-shore legal outsourcing / LPO providersare becoming a vital part of cost-saving initiatives in the modern legal industry, according to yet another expert report on the subject. Leading financial strategy consultant company Citi Private Bank has analyzed mid-year survey data from 187 US-headquartered law firms for this report.

According to the report’s authors, Citi Law Firm Group chairman Dan DiPietro and senior client adviser Gretta Rusanow, the survey reveals a legal services market in which demand is low and competition is high. This situation has resulted in ongoing pressure from clients for law firms to provide greater value at lower cost.

As a result, according to the report general counsel increasingly are willing to expand their portfolios of legal service vendors and add alternatives to traditional large law firms. One of their top three choices, besides smaller firms and virtual firms, is now offshore legal outsourcing / legal process outsourcing / LPO.

From the report: ‘While some firms call the entry of low-cost service providers a threat to their market share, we have heard others describe these lower-cost alternatives as an opportunity to reduce their own cost structures by outsourcing some of their work to these providers."

The authors add: "Some argue that the market really hasn’t changed at all, and once demand picks up again, firms will simply revert to their traditional business model. Indeed, that’s what happened after the recession in the early 1990s." However, "thanks to technology and globalisation, the legal services market in 2010 doesn’t resemble the market in 1991 in any way, shape, or form. Even if overall demand picks up, the entry of new, lower-cost service providers and the willingness of clients to diversify their service-provider portfolios have caused an unprecedented shift in the market."